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8 Things To Look Out For Before Starting Real Estate Investment

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Introduction

Dabbling in real estate investment is not easy, to say the least. There are high risks involved along with a requirement for high capitals. Of course, do not let it get you down. Because high risks also come with high rebates. Real estate investment is definitely a lucrative joint if you have the resources to spare. But before you start on or just started on this venture, it would be good to take note of these common mistakes that investors make so that you can avoid them.

  1. Failing to plan is planning to fail

This applies to everything in your life. Before you start with a project, the obvious thing is that you would need to figure out what direction you would want to head into. This is the same for buying a house for investment. This may not seem like a problem because why would you make such an impulsive decision right? Wait until you get into a hot market and housing prices become irresistible. It might seem tempting to give in at that point but, don’t. Always make a plan for every piece of property before you purchase it.

  1. Skimp on yourself but not your research

When purchasing anything, there is one thing we always do. We always compare it to other similar items. This is the same for houses. Before buying one, which is a big financial commitment, you would need to consider all the factors involved that come with the purchase. In fact, you would need to do more intense research than you normally would any other product. Not only do you need to know the ins-and-outs of the house that you are intending to look at, but you also need to check out the neighborhood as well. Because whether or not you are going to stay in it, the neighborhood will play a part in indirectly impacting whether it will be an optimal place to live in. Buying properties from a reputable real estate company like Frasers is also important.

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  1. Pulling off a one-man show almost never works

They always say two heads are better than one. As experienced as you might think you are, there will eventually be some blindspot that you are unable to detect. This is where professionals come into the picture to ensure that you are covered in every aspect. A good team to help with this would be to have a well-endowed real estate agent, home inspector, handyman, attorney, and insurance representative.

  1. Forgetting that your target market is local

This should be one of the things that you should have planned for as well. Whether you are looking to rent, sell, or flip an investment property, the key thing to look at is that your target market is local. This means plenty of local research needs to be done like drilling down on land values, home values, supply and demand issues, and more.

  1. Forgetting that you still have to deal with tenants

This is another concern for those who are intending to invest in rental properties. It is easy to forget that the renters are humans and have many impromptu requests. Furthermore, different groups of renters have different interests and hot spots. So, when building up your investment property, it is important to take note of the specific characteristics of your tenants. This can be things like what are the things that they can do around the area, or which group of people are you intending to appeal to and more. For example, families prioritize security so a safe neighborhood is of utmost concern, whereas for younger, single individuals, a happening area might just hook them.

  1. Underestimating the interest rates on loans

Not everyone can afford to pay for the whole cost of a house upon request. That is why there are mortgage loans in place to assist with the exorbitant amount and also to allow buyers to buy houses that they would not have had the financial capacity to afford. However, some mortgages are interest-only loans which may seem like a good deal at the point of purchase but when interest rates start to rise, it becomes even more difficult to pay back. So, take a fixed-rate mortgage instead, it will help in the long-run.

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  1. Paying too much when you don’t have to

This normally happens as a result of a long time of searching for the perfect house. Once you have made plans on the kind of house you are searching for and when your research finally bears fruit and finds you the dream investment property, anxiety takes over. Your main goal then becomes to acquire the property at any cost. This means that some people will even overbid for certain properties because of that, and they end up paying more than they should have to. To avoid this, more research can be done by sourcing the prices on the surrounding properties in the same area. That way, you will know if you are being overcharged. You can even ask your own real estate broker because they may be more familiar with the area. So, take note that no matter how tempting it is, take a breath and weigh your options no matter how attractive the property may be.

  1. Miscalculating the required costs

This is another common problem because people tend to think that investment properties are a one-off cost. However, it’s not. No matter whether you are going to rent it out or not, there will be costs like maintenance costs for the house, utilities to settle, appliance costs. There can be so many other areas that will burn a hole in your wallet. Our recommendation is that before you even purchase a house when you are in the planning phase, list out all the potential monthly costs. It is always better to overestimate costs than to underestimate them so that in the former scenario, at least if the costs are lower, your profits become higher.

Conclusion

In conclusion, real estate investment is a complex type of investment that can reap high profits. To do so, much research and planning must be done prior.

 

About the author

Alice Instone-Brewer

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